Tuesday, March 2, 2010

March 2010 Stock Market Update

100 Year Stock Market (Dow) Chart with 25-Year Moving Average

Above is the chart introduced and analyzed in 100 years of stock market (Dow Jones) history -- with the addition of the 25-year moving average (click chart to expand). As before, it begins around 1900; it uses this past month for this year's close. It shows that the market rarely falls very far below its 25-year moving average. When this was originally posted, I noted that the one big exception to the rule was the crash that preceeded the Great Depression. Since February '09, I have been updating this graph approximately once a month.

In early March 2009, I posted Dow At 25-Year Moving Average. The Dow continued lower for several more days before bottoming at 6547 on March 9 -- very near the 25-year moving average at the time. Since then, the Dow has rallied nearly 3800 points. If we treat the February 28 close of 10325 as the 2010 close, the moving average is now at 7279. (See the chart above. Click to expand.)

The market was up about 260 points (2.6%) in February -- recovering most, but not all, of the January loses. Year-to-date, the Dow is down 103 points, about 1%.

In total, this bull market is now up close to 58% in a little less than 12 months. For what it's worth, the largest bear market rally following the 1929 crash lasted about 5 months, during which the Dow rose approximately 50%. Even so, it would not be a huge surprise if this ultimately turns out to be an extended bear market rally. (For a more detailed discussion of bear market rallies following the 1929 crash, see The 1929-1932 Stock Market Crash Revisited).

Data and Computations

For those who would like to perform additional analysis, my Dow Jones yearly closing data and the associated calculations are in this spreadsheet. The spreadsheet will automatically calculate the Dow's growth rate between any two years you input (e.g., average stock market return between 1982 and 1999, excluding dividends). Note: if you have trouble downloading the Excel spreadsheet, see this post.
Note2: the spreadsheet also contains the earnings data and calculations used in the Worst-Case Scenario post.